The Right Seasonal Trade Offers Significant Profit Potential

Last week, I shared with you the importance of not only identifying cyclical and structural opportunities, but also the big profit potential to be had by investing in them. Before too long, we will be exiting the first half of 2014 and entering the second half of the year. There are many drivers in the first half of the year, including several holidays, but they pale in comparison to those in the second half of the year. We also have the back-to-school season that kicks off in late July-early August. Before too long comes Thanksgiving and the holiday shopping season. It can be a blur, which is why I’m already looking for opportunities to share with my PowerTrend Profits subscribers.

One company that used to see a seasonal spike in its share price was tax preparation company H&R Block (HRB). As Americans collected their yearly tax forms at the beginning of the new year and needed advice on preparing their returns, H&R Block’s business would pick up and its share price would climb. It is pretty intuitive when you think about it, but that was long before the days of Intuit’s (INTU) online tax preparation software Turbo Tax.

Another group of companies that used to experience a seasonal swing in demand and subsequently their shares were the mobile phone manufacturers — Nokia (NOK), Motorola, Ericsson (ERIC), Sony (SNE) and their suppliers. It used to be you could buy these shares in late July or early August and sell them during December to net hefty double-digit percentage profits. But two key things have happened during the last few years. First, mobile phones have lost out to smartphones. Second, the mobile phone manufacturers have lost their way and most of them have exited the business. Nokia sold its device business to Microsoft (MSFT). Motorola’s was bought first by Google and has since been sold to Lenovo. Ericsson exited the handset business some time ago and now focuses solely on communications network and infrastructure equipment.

Just because those two examples have gone the way of the dinosaur doesn’t mean there aren’t any other seasonal plays to be had. In fact, over the last few weeks, I’ve rolled up my sleeves and what I’ve found is more than compelling.

Over the last five years, if you bought this particular stock during the May-June lows and sold it in the fourth quarter, you would have had an average return of 61%. The lowest return generated from that timed purchase during the last five years was in 2012 and it was 27% over the June-December time frame. The highest return was 100% in 2009. In 2013, the shares returned 65%. While past performance is not a promise of future returns, this company is benefitting from several powerful drivers, including my Always On, Always Connected PowerTrend — given the continued shift to online shopping and sales, which is accelerating due to smartphone and tablet adoption, as well as The Cash Strapped Consumer shopping for bargains.

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